South African Economy to see 2.5 % growth in 2010
Thématique :
sud afrique
South Africa’s economy can look forward to growth of 2.5 percent in 2010, Ettienne Le Roux, senior economist at Rand Merchant Bank said on Thursday.
He was addressing the Steel and Engineering Industries Federation of SA's annual conference in Johannesburg. Le Roux said this figure should not be considered a bad performance, "given the global downswing."
"The many shock absorbers we have in place -- such as a flexible rand exchange rate, counter cyclical policies, lower inflation, a social safety net, falling interest rates and infrastructure spend -- these won't prevent recession in SA," he said.
However, he added, these so-called shock absorbers would allow SA to recover around the end of 2009 into 2010. Le Roux said the world was made up of surplus countries and deficit countries.
"Unfortunately SA is a deficit country with a history of overspending," he said. "There's nothing wrong with that, but you have to keep foreigners happy in order to fund the deficit," he added.
Globally, Le Roux said it was not only a property bubble that had caused the trouble, but a financial banking crisis too. “The property bubble burst and assets on balance sheets depreciated ... and if a bank has capital problems it doesn't lend, resulting in a situation where the economy can't grow."
However, Le Roux was of the opinion that the massive stimulus packages by governments had prevented a worst case scenario -- that of a great depression. "Instead we have a great recession in 2009."
Le Roux said that what happened in the global economy was important for South Africa.
"When there is a global upswing, SA tends to outperform global growth, but when there is a global downturn, we tend to underperform global growth."
On the consumer front Le Roux said consumers had concentrated on deleveraging and therefore spending slowed. "The consumer matters when it comes to our economy ... if we can get the consumer going again, the economy will start growing again."
Asked why SA banks were behaving like their counterparts in the US by not lending, Le Roux said: "This is their temporary response to the downturn.
"Banks can't lend to households that may not repay them," he said.
However, he added that once the economy stabilised, banks would most certainly ease lending criteria.
He was addressing the Steel and Engineering Industries Federation of SA's annual conference in Johannesburg. Le Roux said this figure should not be considered a bad performance, "given the global downswing."
"The many shock absorbers we have in place -- such as a flexible rand exchange rate, counter cyclical policies, lower inflation, a social safety net, falling interest rates and infrastructure spend -- these won't prevent recession in SA," he said.
However, he added, these so-called shock absorbers would allow SA to recover around the end of 2009 into 2010. Le Roux said the world was made up of surplus countries and deficit countries.
"Unfortunately SA is a deficit country with a history of overspending," he said. "There's nothing wrong with that, but you have to keep foreigners happy in order to fund the deficit," he added.
Globally, Le Roux said it was not only a property bubble that had caused the trouble, but a financial banking crisis too. “The property bubble burst and assets on balance sheets depreciated ... and if a bank has capital problems it doesn't lend, resulting in a situation where the economy can't grow."
However, Le Roux was of the opinion that the massive stimulus packages by governments had prevented a worst case scenario -- that of a great depression. "Instead we have a great recession in 2009."
Le Roux said that what happened in the global economy was important for South Africa.
"When there is a global upswing, SA tends to outperform global growth, but when there is a global downturn, we tend to underperform global growth."
On the consumer front Le Roux said consumers had concentrated on deleveraging and therefore spending slowed. "The consumer matters when it comes to our economy ... if we can get the consumer going again, the economy will start growing again."
Asked why SA banks were behaving like their counterparts in the US by not lending, Le Roux said: "This is their temporary response to the downturn.
"Banks can't lend to households that may not repay them," he said.
However, he added that once the economy stabilised, banks would most certainly ease lending criteria.
